Aero-Gate Pte Ltd v Engen Marine Engineering Pte Ltd

• Jurisdiction: Singapore
• Judgment Date: 31 July 2013
• Date: 31 July 2013
• Docket Number: Suit No 373 of 2012
• Court: High Court (Singapore)

Aero-Gate Pte Ltd

Plaintiff

and

Engen Marine Engineering Pte Ltd

Defendant

[2013] SGHC 148

Vinodh Coomaraswamy J

Suit No 373 of 2012

High Court

Contract—Discharge—Breach—Defendant failing to meet deadline for delivery of goods by reason of slow work progress—Whether plaintiff entitled to terminate contract—Whether plaintiff deprived of substantially whole benefit which it was intended it would obtain under contract

Contract—Waiver—Plaintiff treating contract as alive despite defendant's breach in failing to meet deadline for delivery of goods—Whether this constituted waiver of plaintiff's right to terminate contract arising from its having been deprived of substantially whole benefit it was intended it would obtain under contract

Personal Property—Ownership—Doctrine or principle of accession—Defendant transferring ownership of goods to plaintiff and subsequently attaching other component parts to those goods—Goods with attached component parts remaining in defendant's possession—Whether plaintiff entitled to delivery up of attached component parts in addition to delivery up of goods

Personal Property—Title—Transfer—Relativity of title—Defendant transferring ownership of goods to plaintiff and plaintiff subsequently transferring ownership to its own customer—Goods remaining in defendant's possession—Whether plaintiff entitled to order of delivery up against defendant notwithstanding transfer of ownership to plaintiff's customer

The plaintiff engaged the defendant to fabricate and deliver ten containerised diesel generators to the plaintiff under two purchase orders, in order that the plaintiff might then deliver these generators to its own customer. The nature and scope of the defendant's work under this engagement included the following. It had to procure Caterpillar generators and modify them. The modifications included replacing the standard factory-installed alternators with heavier-duty Leroy-Somer alternators to be delivered by the plaintiff. It had to design and fabricate containers to house the modified Caterpillar generators. It had to procure, or design and fabricate, other component systems and parts. It then had to put everything together into a final product by installing the modified Caterpillar generators and the component systems and parts into the containers.

Under the first purchase order (‘PO 1’), the defendant had to deliver four generators to the plaintiff by end-January 2012. Under the second purchase order (‘PO 2’), the defendant had to deliver six generators to the plaintiff: four by 1 November 2011, and a further two by 1 January 2012. The parties agreed that PO 2 would have the earlier delivery deadlines even though they had entered into PO 2 after PO 1. Accordingly, the defendant suspended entirely work under PO 1 while it carried out work under PO 2.

The defendant failed to meet its delivery deadlines under PO 2 but continued work even after the lapse of those deadlines. It delivered two completed generators to the plaintiff on 16 January 2012 but made no further deliveries thereafter. The plaintiff eventually terminated both PO 1 and PO 2 on 24 April 2012. At the time that the plaintiff did so, the defendant was still working on two generators. In addition, it had in its possession two Caterpillar generators which had not been worked on at all. These four generators had all been committed to the fulfilment of PO 2. No generators had been committed to the fulfilment of PO 1.

At some point in the course of the defendant's work under PO 2, the defendant signed a letter stating that it transferred to the plaintiff ownership of the six Caterpillar generators committed to PO 2, including the six factory-installed alternators in these Caterpillar generators. The plaintiff then proceeded to sign a letter purporting to transfer ownership of the same generators to its own customer.

The plaintiff put forward a number of claims against the defendant. These claims were of three kinds: first, a claim for return of 20% of the contract price under PO 1, which it paid pursuant to the payment schedule; second, claims for damages and other specific sums of money to remedy the defendant's breaches of contract in respect of PO 2; and third, a claim for delivery up of the generators and factory-installed alternators remaining in the defendant's possession. The defendant resisted the plaintiff's claims and, in turn, counterclaimed against the plaintiff damages for wrongful termination of PO 1 and PO 2 as well as for breach of a separate contract unrelated to the two purchase orders.

Held, allowing the plaintiff's claims and dismissing the defendant's counterclaims:

(1) In relation to PO 1, the defendant was in breach of contract because it failed to meet the 31 January 2012 deadline for delivering four generators to the plaintiff. The evidence did not support the defendant's claim that the deadline had been set at large or pushed back to a reasonable time after the completion of PO 2. The plaintiff was entitled to terminate PO 1 on 24 April 2012 because, as at that date, the defendant's breach was such as to deprive the plaintiff of substantially the whole benefit which it was intended the plaintiff would obtain from the contract: at [45] to [48] , [51] , [55] and [56] .

(2) As compensation for the defendant's breach of PO 1, the plaintiff was entitled to recover the 20% of the contract price which it had paid to the defendant. This sum of money was a form of wasted expenditure incurred in reliance on the defendant's promise to carry out its work under PO 1 and reliance damages were available to make good that wasted expenditure. Having been awarded reliance damages, the plaintiff was not entitled to expectation or further damages for PO 1: at [62] to [64] .

(3) In relation to PO 2, the defendant was likewise in breach of contract because it failed to meet the deadlines for delivering six generators to the plaintiff. There was some force in the defendant's contention that there was an implied term providing that the delivery deadlines would be no earlier than a reasonable time after the plaintiff delivered the heavier-duty Leroy-Somer alternators to the defendant, but the defendant had exceeded even that reasonable time. Also, the evidence did not support the defendant's allegation that its slow progress on the work was caused by the plaintiff: at [97] to [105] .

(4) The plaintiff was entitled to terminate PO 2 on 24 April 2012. As at that date, the defendant's performance of the contract was such that two generators, the quality of which was less than satisfactory in material respects, had been delivered two and a half months late, two other generators had not been delivered despite the lapse of six months since the expiry of the deadline, and work had not even begun on the two remaining generators even though the deadline for delivery had been exceeded by almost four months. Given that these were the consequences of the defendant's breach, the breach was such as to deprive the plaintiff of substantially the whole benefit which it was intended the plaintiff would obtain from the contract: at [111] .

(5) By treating PO 2 as alive prior to termination notwithstanding the defendant's breaches in failing to meet the delivery deadlines, the plaintiff had not waived its right to terminate PO 2 in so far as this right arose by reason of its having been deprived of substantially the whole benefit of the contract. The plaintiff was entitled to wait and see what the consequences of the defendant's breach would turn out to be. Treating the contract as alive in the meantime was, at best, an election to affirm the contract for the time being; it was not an election to affirm the contract for all time, regardless of the consequences of the breach as they became apparent over time: at [122] to [124] .

(6) As compensation for the defendant's breach of PO 2, the plaintiff was entitled to damages to be assessed. The plaintiff's claims for specific sums of money were, for various reasons, either rejected or deferred to the assessment of damages phase: at [127] to [134] .

(7) The plaintiff was entitled to an order for delivery up of the generators and factory-installed alternators still in the defendant's possession. The concept of relativity of title meant that the plaintiff had to prove only that its right to possess the items was stronger than the defendant's. This was so because the defendant had transferred to the plaintiff the full extent of its title to the full range of legal rights in those items. The plaintiff did not have to show that it had the strongest right in all the world to possess the items. For that reason the plaintiff's entitlement to delivery up as against the defendant was unaffected by the plaintiff's transfer of title to its own customer: at [145] to [147] .

(8) The plaintiff was entitled to delivery up of the two generators which the defendant still claimed to be working on despite the fact that installed in these two generators were components which had not been the subject matter of a transfer of ownership from defendant to plaintiff. This was because the plaintiff had acquired the right to possess those components by the doctrine or principle of accession: at [150] to [156] .

(9) In relation to the defendant's counterclaim arising from the separate contract unrelated to PO 1 and PO 2, the defendant failed to prove that it was entitled to the remaining 10% of the contract price under that separate contract which the plaintiff had not paid, and it also failed to prove that it had incurred expenditure for work requested by the plaintiff which had not been agreed to in the contract: at [162] to [166] .

[Observation: The concepts of variation, waiver and estoppel in the law of contract were similar in that they all operate to relieve a party from, or of, its pre-existing contractual obligations, or rights; but there were differences of...